Asian shares extended losses Thursday as investors worried about the U.S. “fiscal cliff” and the European economy's further deterioration, underpinning the safe-haven dollar and yen as well as U.S. Treasuries on safety bids.

MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.9 percent, retreating from a near eight-month high on Wednesday, Reuters reported.

South Korean and Hong Kong shares led the declines while Australian shares fell 0.9 percent after all major U.S. stock indexes slumped over 2 percent overnight.

Japan's Nikkei average dropped 1.3 percent to a one-week low as the yen firmed, weighing on exporters.

The benchmark U.S. 10-year Treasury yield stood at 1.68 percent in Asia, after ending down 11 basis points at 1.6246 percent for its biggest single-day drop since May 30 on Wednesday when stock markets tanked.

The dollar was up 0.1 percent to hover near a two-month high against a basket of major currencies of 80.924 hit on Wednesday, benefiting from the U.S. currency's safe-haven appeal. The dollar fell 0.2 percent against another safe-haven currency, the yen, to 79.80.